The Emporia weekly news. [volume] (Emporia, Kan.) 1881-1889, 1887-06-02
a Rfn amid.

A big suit.
NEW YORK, May 25.-The CONNER
eial- advertiser says law suit involv-
ing several millions of dollars is about
to be commenced against Jay Gould
and Russell Sage as trustees Of the
consolidated mortgage of the Kan.
sas Pacific railroad company by foreign
holders of bonds issued under the
mortgage. Certain facts were elected
during the recent examination into the
affairs of the Pacific Railroad by tbs
United States Pacific Railroad Com
missioners, which have long been sus-
pected by parties, but which they were
unable to prove. Among the spectators
Commissioners was William II. De
lancy, Attorney for Frankfort and
Amsterdam holders of Kansas Pacific
bonds. The amount involved is about
S., 600, 900.
The circumstances on which the for
eign bond-holders will base their cause
of action are as follows: Prior to 1878
the Kansas Pacific Road, besides its
stock and floating debt, was loaded
down with a great variety of bonds
like the land grant bonds, first mort
gage bonds, income bonds and others
drawing different rates of interest and
OllllClOUO 6CCJIOtlS VI JLlO 1OdOs
These clashing interests were SO di-
verse and complicated that they
Threatened disaster to the different
creditors. In order to simplify matters
a consolidated mortgage was agreed
upon with Jay Gould and Russell Sage
as trustees, which would wipe out all
the other classes of securities and
place all creditors on an equal
footing. AT the time this con-
solidated mortgage was made the
Kansas Pacific Railroad owned about
Pacific Railroad, worth at par 500 per
share, but at this time of no great
market value. These shares were in
Guided in the list of properties covered
by the great blanket mortgage and
were part of the assets that gave the
mortgage value. Early in 1879 the
plan to consolidate the Kansas Pacific
and the Union Pacific Roads was about
to be carried into effect. Gould, Sage
and Sidney Dillon were directors in
both roads at the time and conversant
with all the facts and circumstances
relating to the consolidated mortgage
and the proposed consolidation of the
two roads. One day about the 1st of
January, 1879, as the story runs, these
three gentlemen were in the Office of
the Kansas Pacific Railroad at No. SO
Broadway. Mr.. Dillon wrote letter
to Messrs. Gould and Sage, as
the trustees of the con-
solidated mortgage asking them to
release from the lien of the mortgage,
the 800 GOO shares of the Denver Pacific
stock and handed the modest request
to the said trustees. Messrs. Gould
and Sage then sat down at the same
desk that Dillon had occupied, and on
letter paper bearing the same heading
as Mr.. Dillon's indited areply declining
to release the stock as requested, on
their own responsibility, but suggesting
that an action should be brought against
them asking for the release of the
stock, as desired, to which they would
make no serious defense. An attorney
was consulted the same day and he
promptly drew up and served COM
plant on the defendants, Gould and
Sage. Ordinarily at least twenty days
would have elapsed before an answer
would be served, but in this unique
case an answer was served on the fol-
lowing day and an application made to
Judge Donohue for the appoint
ment of H. 81. Reggles as referee
and within the next two or three days a
so-called trial was had before the
referee, during which Sidney DilloI
testified that the BOG, 900 shares of tha
Denver Pacific stock was worth $780,.
900 or $500, 600, though its face value
was So, 100000. A report was made in
accordance with this testimony. The
report was confirmed and judgment
entered and the So, 000,O worth of
stock was released from the life of the
mortgage and transferred to Gould,
Sage and Dillon as individuals. The
whole law suit involving 80 large sum
of money was conceived, commenced
and ended inside of one week.
On the same day or the day after the
suit was ended and the stock trans
ferTed. The consideration of the Kan
sas & Pacific Railroads was consum-
mated and shortly after such consOlida-
ton the Denver Pacific stock became
worth its face value. Had that stock
under the lien of the CONSOLE
dated mortgage, each bond issued un-
der that mortgage would have been
worth its pro rata share of S3 ,000, 900
more than it is worth to-day. This
sum, together with the accrued inter-
est, would be about SIS 900 600. 1t is to
secure proportionate share of this So
000, 900 that the foreign bOndholders pro-
pose to bring their suit against Gould
and Sage, claiming that they have
been wrongfully deprived of that
and that court of justice was
used to give color of legal
ity to the robbery. Just what number
of bond-holders or what amount will
join the present proposed action is not
determined, but enough have sig
nified their intentions to become par
ties plaintiff to make it one of the
great law suits of the day. The total
amount of bonds issued under the con-
sOlidation mortgage was about $15, O00,-
900, a great many of which were float
cd in Eron lf0rt and ATnCfnrdon0 nnd
some in London.